Dollar drops as Fed decides not to taper bond buying

The dollar sank to a seven-month low on Wednesday after the Federal Reserve shocked investors by deciding to continue its massive stimulus program, citing strains in the U.S. economy.

In its statement, the Fed said it would await evidence of a more stable economy before adjusting the pace of its purchases.

The market was widely expecting the Fed to reduce its $85-billion-per-month asset-buying scheme by at least $10 billion. The Fed also downgraded its forecasts for the U.S. economy. It now sees growth in a 2 to 2.3 percent range this year, down from 2.3 to 2.6 percent in its June estimates. The downgrade for next year was even sharper: 2.9-3.1 percent from 3.0-3.5 percent.

The dollar index fell as low as 80.29, down 1.1 percent, the lowest since February.

The euro, meanwhile, climbed to a seven-month peak of $1.3498, up 1.1 percent.

Against the yen, the dollar fell to 97.98 yen, a three-week low, and by mid-afternoon trading, it was down 1.0 percent at 98.14.